Kia ora,

Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the International edition from Interest.co.nz.

Today we lead with news the global economy is losing momentum, just as regulators seem to want.

First, there has been a lot of economic data news out overnight, especially in the US. This starts with a raising of their Q3 economic growth rate in the second revision. It was expected to be raised by analysts, but the rise exceeded their estimates. Better consumption levels were the item diving the upside revision.

US mortgage applications resumed their downward slide last week even though mortgage interest rates eased off a bit.

Their housing markets remain in the doldrums, with October pending home sales falling another -4.6% from September to be down -37% from the same month a year ago.

The number of job openings eased by 353,000 to 10.3 million in October of 2022, roughly in line with market expectations, and suggesting demand for workers has started moderating, although the shift is very minor.

The private sector ADP employment report which is a pre-cursor to this weekend's non-farm payrolls report, disappointed analysts. It was expected to report an expansion in payrolls of +200,000 in November but only came up with +127,000. Analysts are expecting the non-farm payrolls to expand by +200,000 which would be much lower than the October +261,000.

There was mixed signals on American inventory levels. Retail inventories rose by almost +$20 bln in October from September (which was less than expected) and wholesale inventories rose +US$17 bln, which was more than expected. Both suggest their excess inventory problems are not easing.

American exports rose +9.9% year-on-year to October, but imports rose +12.4% on the same basis, pushing their merchandise trade deficit out to -$99 bln for the month.

Meanwhile the widely-watched Chicago PMI from their industrial heartland retreated rather sharply in November and by much more than expected. Apart from the 2020 pandemic shock, it is now at its weakest since the GFC.

This, and the expected US Fed Beige Book survey for November which is due out soon, are all expected to confirm that the Fed's rate hikes are having the desired effect of cooling the giant American economy. Chairman Powell is expected to acknowledge as much in a speech today, signaling that the heavy lifting is over for a while and that rate hikes from here will be more moderate and less frequent.

Across the Pacific, China's factories are slowing quickly now. The official PMI records a sharpening contraction, and that is compounded by a similar sharper contraction in their services sector. And it is unlikely to improve anytime soon. People in the Chinese city of Guangzhou clashed with riot police as authorities investigated more of those who have taken part in a string of protests against their pandemic restrictions. 

In India, there are definite signs of slowdown there too, although to be fair the pace of their expansion is still good, just not as good as it was earlier in the year. India has an inflation problem too, and that risks social pressures.

In the EU overall inflation is easing back, now at 10% in November and down from a record high of 10.6% in October. Market were forecasting 10.4% so this is an undershoot (although few Europeans would feel like that).

In Germany, their November employment data came in better than expected with rising employment levels and a jobless rate of only 3.0%. Germany certainly has its issues but their labour market is not one of them.

The UST 10yr yield starts today at 3.77% and up +4 bps. 

The price of gold will open today little-changed at US$1753/oz.

And oil prices start today up another +US$1.50 from this time yesterday at just over US$80/bbl in the US while the international Brent price is up much less at just over US$86.50/bbl.

The Kiwi dollar will open today at 62.4 USc, and up almost +½c since this time yesterday. Against the Australian dollar we are firm at 92.8 AUc. Against the euro we are also up +½c at 60.4 euro cents. That all means our TWI-5 starts today at 71.5 and up +50 bps from this time yesterday.

The bitcoin price is now at US$16,851 and up +2.7% from this time yesterday. Volatility over the past 24 hours has moderate at just +/- 2.2%. Meanwhile, the ECB said bitcoin is being artificially propped up and should not be legitimised by regulators or financial companies as it is more akin to gambling.

You can find links to the articles mentioned today in our show notes.

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again tomorrow.